In this article, Adam Stein-Sapir of Pioneer Funding, LLC, provides insights on the implications of a bankruptcy filing for property owners and tenants.
Article Link: https://commercialobserver.com/2019/10/owners-of-brooklyn-properties-who-settled-for-tenant-harassment-files-for-bankruptcy/
Summary
Clinton Hill GP LLC, a joint venture that owns a portfolio of rent-stabilized apartments in Brooklyn, filed for Chapter 11 bankruptcy following a settlement over tenant harassment. The company, which is a partnership between East Coast MIG and HQ Real Estate, is facing over $60 million in debt. The largest claim against the portfolio is $29.3 million by Delshah Capital. Despite the bankruptcy, Delshah is optimistic about restructuring and resolving the issues. The bankruptcy filing raises concerns about the future maintenance of the properties, with Adam Stein-Sapir commenting that financial constraints on the owners are likely to persist during the bankruptcy process, potentially affecting repairs and upkeep.
- The owners of 128 rent-stabilized apartments in Clinton Hill, Brooklyn, filed for Chapter 11 bankruptcy with over $60 million in debt.
- Delshah Capital, the largest creditor, is owed $29.3 million but is willing to work on a restructuring plan.
- Adam Stein-Sapir suggests that the bankruptcy filing could mean continued financial constraints for the owners, affecting property maintenance.
Q&A
What happens to tenants when a property owner files for bankruptcy?
When a property owner files for bankruptcy, tenants may face uncertainty regarding the maintenance and repairs of their living spaces. While the bankruptcy process is ongoing, funds for property upkeep may be limited, potentially leading to a decline in living conditions. However, existing settlements, like the one reached for tenant harassment in this case, are unlikely to be affected directly by the bankruptcy filing.
How does filing for bankruptcy impact a property owner’s debt obligations?
Filing for bankruptcy can provide a property owner with the opportunity to restructure their debt. In a Chapter 11 bankruptcy, the owner may propose a plan to pay creditors over time while retaining control of the business and its assets. Creditors, such as Delshah Capital in this case, may work with the owner to develop a restructuring plan that addresses the debt and operational issues.
What are the implications for creditors when a debtor files for bankruptcy?
Creditors face the risk of receiving less than the full amount owed when a debtor files for bankruptcy. Unsecured creditors, in particular, are at the end of the payment hierarchy and may recover little to nothing. This risk can lead creditors to consider selling their bankruptcy claims to trade claim buyers, as discussed in a guide on Pioneer Funding, LLC’s website. Selling a claim can provide immediate cash and avoid the uncertainties of the bankruptcy process.
